Lawsuit vs anti-Iran group is dismissed over U.S. state secrets

NEW YORK (Reuters) - The U.S. government on Monday won the dismissal of a private defamation lawsuit against an influential anti-Iran advocacy group, after claiming that the case could jeopardize U.S. national security by revealing state secrets.

U.S. District Judge Edgardo Ramos in Manhattan agreed with the Department of Justice that letting Greek shipping magnate Victor Restis pursue his case against United Against Nuclear Iran posed what the judge called an "unjustifiable" risk of damaging disclosures.

"The court recognizes that dismissal is a harsh sanction," Ramos wrote. "It is particularly so in this case because plaintiffs not only do not get their day in court, but cannot be told why."

But Ramos said dismissal was "appropriate," given that there was "a reasonable danger that disclosure of the facts underlying the government's assertion would in fact jeopardize national security," even if a trial were held out of public view.

The government has often successfully used the state secrets privilege to defeat court challenges to federal activity, such as the National Security Agency's covert wiretapping and the Central Intelligence Agency's treatment of terrorism suspects.

But its use in the Restis case marked a rare expansion by Attorney General Eric Holder into private civil litigation in which the government was not a party.

The government did not publicly say why or on whose behalf it invoked the privilege, which empowers it to shield more information than necessary to protect law enforcement generally.

"We are mystified that the U.S. government has such a stake in this case that it would take such extraordinary steps to prevent full disclosure of the secret interest it has with UANI or others," Abbe Lowell, a lawyer for Restis, said in a statement, using the abbreviation for United Against Nuclear Iran. He said Restis has not decided his next legal step.

Ramos issued his decision as the Obama administration tries to reach a nuclear accord with Iran.

The Justice Department declined to comment.

Lee Wolosky, a lawyer for United Against Nuclear Iran, said Ramos "reached the correct result."

Restis had claimed that United Against Nuclear Iran, whose advisers include former U.S., European and Israeli intelligence officials, falsely accused him and his Enterprises Shipping and Trading SA of violating sanctions against Iran by exporting oil from there.

"This decision is troubling," said Dror Ladin, a lawyer for the American Civil Liberties Union, which with other groups submitted a brief on behalf of Restis. "It leaves the parties in the dark, and denies the public any understanding of why the government is denying someone his day in court."

United Against Nuclear Iran uses a "name and shame" campaign to identify people and companies doing business with Iran while that country pursues what it considers an illegal nuclear weapons program.

The case is Restis et al v. American Coalition Against Nuclear Iran Inc et al, U.S. District Court, Southern District of New York, No. 13-05032.